My wife and I have been selling on Amazon since 2006 and using Fulfillment by Amazon (FBA) since 2010. It’s no secret that FBA fees (and sizing standards) have gone up substantially over the last few years.
FBA has a ton of advantages:
For one thing if you are selling 20 to 30 items a day, that is 20 to 30 packages you don’t have to package and ship. And, of course, you save the cost of the box and packing materials on those items.
Another advantage is pricing over Merchant Fulfilled (MF) items. When your product is compared with a MF product, Amazon considers your shipping cost to be zero. Whereas, when Amazon looks at price to see who wins the buy box, they add the cost of shipping to the MF seller’s item price.
Another factor is when you are competing with a MF seller and you are both at the same price, Amazon tends to favor the FBA seller.
An additional benefit is that you can use Amazon to fulfill non-Amazon sales from other platforms such as eBay or Etsy. And when you do this Amazon passes their low shipping rates on to you (although they do add a fulfillment fee).
As you can see there are many benefits to using FBA. However, the most significant downside is the cost.
Look at these three screenshots from my account.
If you look to the right, you can see my selling cost and the total Amazon fees with the FBA fee beside it. Now, let me tell you about the size of the items and my cost.
- The first item (Scoped pistol case) is Size 19-1/2 Long” x 10 wide, however, when I send it to Amazon, it is folded and sealed in a bag that is only 10-inches long by 5-in wide. So that is the size Amazon bases their FBA fees on. My selling price is $16.95. Total Amazon fees are $11.81 including $9.27 FBA Fee. So my net after fees is $5.14. Since my landed cost is $4.55, the margin is so small (59¢), I have stopped selling that item.
- The next item is a 12-oz can of Habanero Honey peanuts. My selling price is 9.73. The can is 4-inchesacross and 4.2 inches tall and weighs 12-ounces. Total Amazon fees are $5.49 which includes a $4.71 FBA fee. So my net after fees is $4.24. Fortunately, my cost is pretty low at $2.90 so I make $1.34 on each can. That is not much money, but these sell pretty quickly.
- The last item is a shotgun sling. Although it is 34-in long, it folds up quite nicely. The folded and shrink wrapped item we send to Amazon is 9-in long, 2-in wide and 1.25 in thick. I sell them for $18.25. The fees are $5.93 including the $3.19 FBA fee. So my net is $12.32. Once again, my cost is quite low at $6.55 so when all the fees are paid I clear $5.77 which is not bad. (These also sell quite quickly).
The Amazon commission before FBA fees is 15% and each of these items (except the peanuts) could be sent First-class mail for approximately $2.85. In the case of the first and last item Amazon will add about $3.50 for shipping so I will actually make a little on the shipping. The peanuts will cost me closer to $3.50 to mail, which is about what Amazon gives me.
So what do you do with this information? First go through your FBA inventory, subtract your fees and your item cost and determine if you have any losers and stop selling those altogether. (I consider a loser anything I make less than $1.00 on).
Next create an MF listing for the items to make money on. Remove the Amazon commission (15% on most items) and determine the shipping cost compared to the Amazon shipping allowance. Now you have a decision to make; Do you want to keep selling it FBA or change to MF? Remember you need to be the lowest cost including shipping to win the buy box. And the other FBA sellers have a zero shipping cost. So compare your cost to other sellers in FBA, if any.